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Johannesburg - One of South Africa's leading vehicle credit providers believes that consumers' aversion to buying new cars has hit its low point.
The WesBank vehicle sales confidence indicator for the second quarter, which is based on car dealer polls, sank to a low of 4.2. In one of the key findings, 90% of respondents viewed the vehicle market as inactive.
"We really believe that we have seen the bottom," Chris de Kock, WesBank executive head of sales and marketing, said on Wednesday. "I would be very surprised if dealers are less confident when we speak to them in July."
However, De Kock admitted to making a similar optimistic prediction in the first quarter. "It's very difficult to make predictions," he said. "But what makes me more confident now is some material changes that have taken place."
He said that the three aggressive interest rate cuts since mid-February, and a slight improvement in debt servicing rates, would push the vehicle market towards a recovery.
At present, the main reasons why South Africans are not buying cars are credit-related. De Kock said a high proportion of the population has adverse credit records.
Also, the country's household debt as a percentage of disposable income is high, standing at 76.4% in the fourth quarter of 2008.
Second-hand comes first
"South Africans are in a de-leveraging mindset," said De Kock. "They are less willing to commit themselves to long-term debt."
WesBank said new vehicle running costs have remained static over the past year. This perceived affordability is expected help the auto market.
For instance, the running cost of an entry-level vehicle priced at R100 000, financed over 54 months, has increased by only 1.3%. This includes instalments, insurance premiums, fuel and maintenance.
These costs soared 43% between 2004 and 2008.
However, industry experts believe a real recovery in new car demand is unlikely to come before 2010. For the time being, South Africans are increasingly favouring used vehicles.
De Kock said that about two-thirds of WesBank's monthly new business is generated by used car sales.
"Used cars are definitely growing in significance for dealers," he said. "There's a lot of value there."
Imperial, Barloworld and Bidvest have all recently pointed to the defensiveness of the used car market in their business models.
- Fin24.com